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Mark J. Roe, Chaos and Evolution in Law and Economics, 109 Harv. L. Rev. 641 (1996).


Abstract: I refine here the classical evolutionary model from law and economics by modifying it to accommodate three related concepts, one from chaos theory, another of path dependence, and a final one of politically-induced punctuated equilibrium from modern evolutionary theory itself. Although economic evolution selects out for extinction very inefficient results, and efficient results tend to survive, the evolutionary metaphor is by itself not rich enough to explain enough of what we see surviving, nor is it rich enough to explain fully how what survives survived. Within the looseness of acceptable efficiency, what survives depends not just on efficiency but on the initial, often accidental conditions (chaos theory) that establish an institutional structure inside which the economic players evolve. What survives also depends on the history of what problems had to be solved in the past -- problems that may be irrelevant today (path dependence); solutions to what later become irrelevant problems can be embedded in slowly-changing institutional structures. Although institutions cannot be too inefficient if they have survived, evolution toward efficiency constrains but does not fully determine the institutions we observe.